Goldman Sachs doubts there will be a Round 3 of PPP loans for small businesses

Barely a month into the Small Business Administration’s Paycheck Protection Program, nearly two rounds of funding have been depleted. But Goldman Sachs economists don’t think there will be a Round 3.

Money for the program has been spoken for at a rapid pace—As of May 1, over half of the $310 billion Round 2 funds were approved ($175 billion), per the SBA, for over 2.2 million applications. Funds from Round 1’s $349 billion pool ran out in just 13 days.

But Goldman Sachs is doubtful another round is in store. Economists wrote in a May 4 report that, while “additional aid for businesses is possible,” they don’t expect additional rounds of funding for the PPP.

The firm estimates that eligible businesses have expenses eligible for loan forgiveness of around $750 billion—And with nearly $700 billion in funding for the first two rounds combined, the firm believes most eligible businesses would be covered. Now, Goldman believes there are “other options to assist small businesses without increasing PPP funding.”

Instead of new PPP funding rounds, Goldman economists see three other avenues to aid small businesses: First, the 8-week term for forgivable expenses could be extended (for many businesses, 75% of loans must be used for payroll by June for the loan to be forgiven); Second, businesses will soon be able to get loans from the Fed’s Main Street Lending Program (MSLP), which is opening up for businesses with up to 15,000 employees or up to $5 billion in annual revenue (it is not, however, a grant); And third, the firm anticipates there is potential for an expansion of the “employee retention credit” in the CARES Act, which provides a 50% tax credit for employee wages for certain companies hit by shutdowns. The firm notes that “providing a partial subsidy for all wages of affected firms might not cost any more than a full subsidy for wages of virtually all small businesses, as PPP does.”

Yet another aspect Goldman highlights is the “recent political scrutiny” engulfing the program. From carveouts that allowed large chains to receive funds to public companies receiving millions, the program has been plagued with issues from the get-go.

After news broke that over 300 publicly-traded companies received over $1 billion in loans, according to some data trackers, many small businesses and lenders alike voiced frustrations with the program: “The reality is this program has not met the needs of the grand majority of true small businesses, Main Street small business,” Eyal Lifshitz, CEO of BlueVine, recently told Fortune.

Meanwhile, many small businesses have dealt with massive delays in getting funds, and demand is still strong for the PPP, according to banks and fintech lenders.

For the banks doling out the loans, concerns for the need of another round are already top of mind. John Asbury, CEO of the regional Atlantic Union Bank, based in Virginia, recently told Fortune: “The real question in my mind is, if after the second round of funding there is still great demand from the program from the traditional businesses that qualified, the smaller ones, will Congress support a round three of funding? I hope they will.”

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